Dollar spiked higher after much stronger than expected headline non-farm payroll number. But the greenback quickly retreated back into established range after looking at the details. NFP showed 227k growth in the job market in January versus expectation of 175k, up from prior month’s 157k. However, unemployment rate rose 0.1% to 4.8%, above expectation of 4.7%. The bigger disappointment is seen in wage growth. Average hourly earnings rose 0.1% mom in January, much lower than expectation of 0.3% mom. Dollar is set to end the week as the second weakest major currency, next to Sterling.

UK services PMI dropped to 54.8 in January, down from 56.2, below expectation of 55.8. Markit noted that "anecdotal evidence widely attributed cost pressure to fuel, salaries, freight charges and imports." And, "the degree to which costs are rising threatens to test the tolerance of some policymakers in terms of their willingness to ‘look through’ what’s likely to be a marked upturn in inflation in 2017." Sterling remains the weakest major currency for the week. One of the reasons is BoE’s cautious neutral policy stance. After leaving monetary policies unchanged yesterday, BoE governor Mark Carney warned of the uncertainty over Brexit, cautioning that "there will be twists and turns along the way". He reiterated that "we can see scenarios in either direction" for policy. More in BOE Upgrades Growth Outlook; Yet, Unemployment Slack More than Previously Expected. Also from Europe, Eurozone retail sales dropped -0.3% mom in December. Services PMI was revised up by 0.1 to 53.7 in January. Italy services PMI rose 0.1 to 52.4 in January.

From China, Caixin PMI manufacturing dropped to 51.0 in January, down from 51.9 and missed expectation of 51.8. Caixin noted in the release that "The rate of improvement slowed since December, as output and new orders increased at weaker rates amid a further reduction in employment. And, "the Chinese economy maintained stable growth in January. But the sub-indices showed that the current growth momentum may be hard to sustain. We must remain wary of downward pressures on the economy this year."

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USD/CHF Mid-Day Outlook

Daily Pivots: (S1) 0.9884; (P) 0.9911; (R1) 0.9952; More…..

USD/CHF spikes higher in early US session but upside momentum is unconvincing. Intraday bias remains neutral as the consolidation from 0.9860 temporary low is extending. Overall, outlook remains bearish with 1.0043 minor resistance on hold and deeper fall is expected. Decline from 1.0342 is seen as the third leg of the pattern from 1.0327. Below 0.9860 will target 61.8% retracement of 0.9443 to 1.0342 at 0.9786 and below. On the upside, break of 1.0043 will indicate short term bottoming and turn bias back to the upside.

In the bigger picture, rejection from 1.0327 resistance suggests that consolidation pattern from there is still in progress. Fall from 1.0342 is seen as the third leg and retest of 0.9443/9548 support zone could be seen. But we’d expect strong support from there to contain downside. At this point, we’re still expecting the larger rally to resume later to 38.2% retracement of 1.8305 to 0.7065 at 1.1359.

USD/CHF 4 Hours Chart

USD/CHF Daily Chart

Economic Indicators Update

GMT Ccy Events Actual Consensus Previous Revised
01:45 CNY Caixin PMI Manufacturing Jan 51 51.8 51.9
08:45 EUR Italy Services PMI Jan 52.4 52.6 52.3
08:50 EUR France Services PMI Jan F 54.1 53.9 53.9
08:55 EUR Germany Services PMI Jan F 53.4 53.2 53.2
09:00 EUR Eurozone Services PMI Jan F 53.7 53.6 53.6
09:30 GBP Services PMI Jan 54.8 55.8 56.2
10:00 EUR Eurozone Retail Sales M/M Dec -0.30% 0.30% -0.40% -0.60%
13:30 USD Change in Non-farm Payrolls Jan 227K 175k 156k 157K
13:30 USD Unemployment Rate Jan 4.80% 4.70% 4.70%
13:30 USD Average Hourly Earnings M/M Jan 0.10% 0.30% 0.40%
15:00 USD ISM Non-Manufacutring Composite Jan 57 57.2
15:00 USD Factory Orders Dec 1.00% -2.40%

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